Thank you for standing by, and welcome to the Blend Labs, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Meg Nunnally, Head of Investor Relations. Please go ahead.

Good afternoon, and welcome to Blend's Financial Results Conference Call for the Second Quarter of 2025. I'm Meg Nunnally, Blend's Head of Investor Relations. Joining me today is Nima Ghamsari, our Co-Founder and CEO; and Amir Jafari, our Head of Finance and Administration. Before we start today's call, I'd like to note some of the statements on our call will be forward-looking. We also refer to certain non- GAAP measures, which are reconciled to GAAP measures in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we'll discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the third quarter and full year 2025 and expectations about our markets, our strategic investments, product development plans and operational targets may be considered forward-looking statements under the federal securities laws. The company cautions you that forward- looking statements involve substantial risks and uncertainties and a number of factors, many of which are beyond the company's control, could cause actual results, events or circumstances to differ materially from those described in these statements. Please see the risk factors we've identified in our most recent 10-K, 10-Q and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. All comparisons made in the course of this call are against continuing operations for the same period in the prior year, unless otherwise stated. Lastly, we'll be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call. I'll now turn the call over to Nima.

Hello, everyone. This is our second quarter earnings call, and it's the middle of 2025, but it feels like an annual call since it is our fourth consecutive quarter of solid results. We've now posted 4 quarters of year-over-year total revenue growth and 4 quarters of non- GAAP operating profitability. I did want to take a moment to acknowledge the news we released earlier today regarding the leadership transition. I want to thank Amir for his contributions. He took us on the hard work of navigating the company through a challenging period and has set us on a path towards a brighter future. We wish him great success in his future endeavors. Our strong results today are a reflection of the hard work we did in 2023 and the first half of 2024, to get our house in order and refocus on our strength as a platform company with our simplified Blend strategy. We turned the corner around the middle of 2024 and entered 2025 ready to execute. There are three key areas I'd like to highlight where we feel very confident and excited for the future. One, expanding our market share with new logos; two, expanding take rate with existing customers; and three, growing consumer banking to diversify our revenue base. Our sales momentum accelerated in Q2 with 23 newer expanded deals, which is double Q1. This growth was driven by a healthy mix of new customer acquisitions and deep product expansions from existing customers, reinforcing Blend's position as a long-term multiproduct platform partner. In addition to expansion deal we previewed in May, we signed additional 7-figure expansion. This figure also includes 3 net new logos in the independent mortgage bank or IMB vertical, where we've built a dedicated business unit that brings innovation and go-to-market under a single…

Thank you, Nima. I'd like to say that while I will be moving on from Blend, I'm extremely proud of what we've achieved during my time here. Everything we've done, including our simplified Blend strategy has made Blend stronger. We cleared one of the final hurdles in implementing our simplified Blend strategy when we announced the signing of a definitive agreement to sell Title365 to Covius in June. We expect that transaction to close later this year, subject to regulatory approvals. With this transition, we are now fully aligned both operationally and strategically around a software-first model that scales through partnerships and platform innovation rather than own services. With our simplified platform focus, we're staying ready to capitalize when volumes recover. Let's dive into the results. Total revenue in the second quarter of 2025 was $31.5 million, ahead of the midpoint of our guidance and up 10% year-over-year. As Nima mentioned, this is our fourth consecutive quarter of year-over-year growth. Growth was driven by a 43% increase in consumer banking suite revenue to $11.4 million and partially offset by a 3% decrease in mortgage suite revenue to $18 million. A 43% increase in consumer banking suite revenue was broad-based across all product lines, including core consumer banking products like deposit account openings, credit cards and vehicle loans as well as home equity lending products, which are included in our consumer banking suite. Overall volumes for our mortgage suite were roughly flat year-over-year. The 3% decrease in mortgage suite revenue was primarily driven by lower EVPFL, which was $88 for the second quarter of 2025 versus $97 a year ago. We, of course, anticipated lower EVPFL as a consequence of our shift to a platform model, and this accounted for $5 of the step down as we decreased low-margin add-on product…

[Operator Instructions] And your first question comes from the line of Dylan Becker with William Blair.

Maybe Nima, starting with you. I know there's been a little bit more near-term rate volatility and some kind of pump takes on origination volumes over the past few years here. But wonder how you're kind of thinking about the factors that are contributing to potential unlock of overall volumes, whether rates, pricing, supply, et cetera, and kind of what you're hearing there? And then maybe pairing that with the momentum you guys are seeing in the home equity product on the consumer side that maybe makes you a little bit more insulated regardless of which directions rates move.

Yes. Thanks for the question, Dylan. A couple of things I'd say, the small rate movements make a big difference in our customers' volume basis. And so we've seen that a few times late '24, we saw that once. And then even recently when rates came down on Friday because of the jobs report, we saw that as well. So on the one hand, it's something we pay very close attention to. But on the other hand, it's something that's out of our control. And so the things that in our control is one of the things that you called out, which is a budding home equity business. And I talked about Rapid Refi in my prepared remarks, but another one of our Rapid products is Rapid Home Equity, which is a far more automated, far higher conversion home equity product that we're really excited about. And it's getting great uptake from our customers. I mean they really love the concept of giving someone a real home equity offer that they can really act on in the moment and it creates more value for them, creates more value for us in turn. So not only are we seeing home equity volumes rebound, we signed a number of very large home equity lenders late last year and some this year. And on top of that, we've been adding Rapid Home Equity as an add-on to existing home equity customers. So in some ways, that's helping insulate us from the things that are out of our control like rate movements. But I think we've kind of set ourselves up really well. The last thing I want to highlight as part of that is probably the most important, the thing that I really love the most about this year's numbers is how much we've stabilized our customer base in a time of turmoil, because that's the thing that sets us as a foundation. It sets the foundation for us as a company to not just take advantage of the rate rebound, but come out much stronger when rates do come down. The fact that we have basically -- I shouldn't say basically, we have 0 churn this year, churn notices this year from customers. I mean that's quite a feat for any software company, let alone a software company in the space as volatile as the mortgage industry. So very excited about that and something that we really hang our hat on because we've stayed customer focused. We've made sure we do right by our customers. It doesn't mean we're perfect, but we always follow through on the things that we say we're going to do as best that we can, and our customers all know that we care about them.

Yes. No, certainly. No, I agree wholeheartedly with that and that makes sense, Nima. Maybe, Amir, switching over to you on the per funded loan metrics. And I do think with a large customer kind of working with them from an economic perspective makes sense with the near-term step down there. But could you maybe remind us the puts and takes of what that kind of implementation and ramp can look like over time as maybe they start onboarding and adopting more products and how we could think about kind of the pace of recovery as Rapid Refi and a handful of these other solutions start to contribute more materially due to the higher ARPU uplift there?

Absolutely. Thanks, Dylan, for the question. I'll start with the same component as to what Nima mentioned, which is for the customer that we signed and this ability to, in essence, not just keep the customer, but enable us to grow with them. We brought a very large customer on board. That customer, in terms of your question of ramp, they're already a large customer. And so in the short-term, what you'd see is in essence, the headwind that we discussed, which is a pressure on our economic value per funded loan for this customer and for our other customers, the expansion for us on EVPFL will come from 2 components. It will come from not just the ramp of the mortgage solution, which is where we always start, but it will come from then the adoption of Close, which we've shared is highly accretive to us and very -- just very beneficial for both Blend and obviously, our customers. Then lastly, as it pertains to what you already noted yourself, we have shared and we believe Rapid Refi, for what we're seeing in the market today -- not just in terms of timing, but also in terms of its value components -- will be the second component that allows us to become much more headwind -- much more tailwind centric, I'm sorry, and allow us to regrow and get EVPFL back to a growth rate.

And your next question comes from the line of Ryan Tomasello with KBW.

Nice to see the strong sales momentum. Regarding the 23 deals you called out in the third quarter, can you say what the mix was in terms of new logos versus expansion? And on the new logo front, it sounds like Nima, you're seeing traction there, but just any way to quantify if you're seeing that mix of new logos in terms of deals quarter-to-quarter increase? And then lastly, just on the IMB logos you called out, I think, 3 new logos signed in the quarter here. Any context on what drove those wins, specifically if those were competitive takeaways?

Yes. I'll start with the IMB question first. In many cases, those are competitive takeaways. because it's taken a lot for us to get to this point in the cycle where we're not just stable, but we're innovating quite a bit. And we mentioned Rapid Refi, but that's one piece. We're investing heavily in Blend Close. We're investing heavily in our core platform. And so our customers really appreciate that. They want a partner who can innovate through the ups and downs in the market. And so I think we've shown that we're resilient, and we will do that. And we'll keep building things. I mean one of the most common things I hear about software providers in the industry is they stopped innovating. They let their technology get stale. And they look at this AI wave as something that our customers look at it as something they can really benefit from. But tech companies in this space aren't really being able to take advantage of it in the way that they should. And so I think a lot of that is our resilience is what has led us to this point in the cycle with the IMBs. And I think layering that on top of the fact that we now have a dedicated business unit. One thing about IMBs, and you probably know this, Ryan, is they're very idiosyncratic. They're a little different than a bank or a credit union or maybe a lot different in some cases. And so they have unique needs. They're very different in how they operate, how they track their P&L, what things are important to them, which is why we stood up a dedicated IMB business unit. And that dedicated IMB business unit includes the ability to build products, the ability to support…

Great. And then, Amir, I think -- apologies if I missed this in your prepared remarks, but I think you've previously been guiding to a Rule of 40 by the end of this year. Is that still the case? Or anything notable to call out in terms of changes on that front?

Ryan, thanks for the question. We're not in a position to make any changes yet. We're obviously monitoring the macro in its own aggregate. There's a lot of movements, not just to your question, but to what Dylan mentioned earlier. But we expect to be able to come back in the next quarter and just either reaffirm or obviously change or update our perspective.

[Operator Instructions] And our next question comes from the line of Aaron Kimson with Citizens.

Nima, I want to start with a bigger picture question. I think it's topical with the release of GPT-5 today, SaaS companies trading off in your vertical software background of Palantir and Blend. How do you think about the relative positioning of vertical software vendors versus horizontal vendors in an agentic AI world, specifically in financial services?

Yes. The thing about vertical software that makes it so special is that you can get real results as a customer very quickly. Some of the customers that we announced, putting aside AI for a second, some of the customers we announced earlier this year or last year are already live and ramped and doing a ton of volume, including a top 10 bank. So something that we're super proud of is that because it's vertical software, because it's built -- purpose-built for this industry and for this use case, it allows for much more rapid ROI for our customers. So that's one piece. I think vertical software in general is superior in a lot of ways for that reason versus going into a horizontal platform and completely having to customize it from scratch to serve a use case that's the same across hundreds of or thousands of institutions. And then with AI, it becomes even more acute because the purpose of AI, agentic AI is to -- is going to be in this industry, my belief is going to be to take a lot of the things that are operationally very manual for our customers that drives up costs for our customers and ultimately for consumers. It's going to make those things much faster and easier. And so a simple example would be, humans have to go and look at appraisals and look for 3 exterior photos and 3 interior photos. And that's something that AI can do extremely well. But there's thousands of those examples per loan. And so when you're thinking about how to make this industry modern and efficient, really the only way is something we can handle this level of unstructured complexity and bring simplicity to it, and it has to be purpose-built for this industry in order to do that. Otherwise, every single lender is going to be building the same prompts, the same agents with the same tools for the same use case from scratch. And it's hard to maintain because those rules change as Fannie and Freddie and others update their guidelines as regulations change. So it's very important, and I think vertical software companies are well positioned to deliver outcomes faster with AI. And hopefully, Blend is no exception.

That's really helpful perspective. And then Amir, thanks for everything as well. I guess one last question on the public calls for you. It's great to see the strong consumer banking growth again this quarter at 43%. I'm trying to quantify Dylan's question a little bit. How should we think about the home equity component of the consumer banking line, its contribution to growth coming in above the top end of the CAGR range again in 2Q and the possibility that HELOCs will be included in the mortgage revenue line in the future so we can better understand the core consumer revenue.

Thanks, Aaron. Let me double click into that by just breaking it down into a few pieces. First, as it pertains to home equity, there's a seasonal aspect that we've spoken to. And so you're seeing that uptick from a quarter-over-quarter perspective. Second, we've continued to not just add from the core home equity application, but in essence, our Rapid Home Equity. We're seeing that app gain traction, which implies that our market share and overall, what we're able to achieve has been increasing, hence, the increase that you see relative in the consumer banking numbers. Embedded in those numbers as well, though, is our success as it pertains to non-home equity, so deposits and the other core components, credit cards, auto and so on and so forth. It's the function that all of those are in essence, executing right now, which is why we were able to execute to what we did in Q2. On a prospective basis, to now correlated to your question as it pertains to what Dylan mentioned, there will be a point in time where, again, as you see a very large return and stabilization of mortgage and refi, we expect home equity to somewhat stabilize. You'll see, in essence, one side versus another. But we feel very good because of the market share that we have in home equity, the expansion through Rapid Home Equity, which is really allowing us to drive price uplift. And then lastly, our ability to just bring that together from a whole suite of solutions that just power what we do today.

[Operator Instructions] And your next question comes from the line of Joe Vafi with Canaccord.

This is Pallav Saini on for Joe. I just have one. Nima, you talked about the opportunities in AI and what you can do there for your clients. How should we think about the investment that's needed to get there?

Good question. Yes, I would say to start with, it's -- we're very early in our AI journey. So I want to couch my answer with that in mind. But one of the things that makes AI very helpful for us is not only the use cases and outcomes that it can drive for our customers, but it's also making us more efficient as an organization using the AI tools internally. We use it across our entire product life cycle. We use it across every aspect of how we work with creating materials, content. And so it's making us more efficient. And even building AI tools is getting more efficient by the day. I don't know if you saw, but an hour ago or so, OpenAI released GPT-5. Those kinds of things are only beneficial to our story and our ability to serve our customers and drive ROI. And so while I don't have an exact investment number for you, I can say, in aggregate, it's making our company better and more efficient, and it will make our customers' lives better and more efficient as well.

[Operator Instructions] There is no further question at this time. That concludes today's call. Thank you all for joining. You may now disconnect.